# Ammonia and Urea Urea is the main way ammonia's nitrogen reaches farms: about 55% of world ammonia demand goes into urea, usually made at the same site using the ammonia plant's own CO2. Little ammonia is traded, so urea prices largely set ammonia producers' margins. Source page: https://www.materialinsights.org/links/ammonia-and-urea/ [Ammonia](https://www.materialinsights.org/chemicals/ammonia/) (chemical) and [Urea](https://www.materialinsights.org/chemicals/urea/) (chemical): 4 relationships. ## How they are linked ### 1. Feedstock: ammonia plus CO2 *Physical flow · Strong · Ammonia to urea* Urea is synthesised from ammonia and carbon dioxide under high pressure, so every tonne needs a fixed amount of ammonia. - **566 kg** ammonia per tonne of prilled urea, Snamprogetti process - **733 kg** CO2 per tonne of prilled urea, same process - **about 55%** of world ammonia demand goes into urea These figures match the chemical ratio (2 x 17/60, or about 0.57 t of ammonia, and 44/60, or about 0.73 t of CO2, per tonne), so plant efficiency changes the energy bill far more than the ammonia need. Because urea is the largest single outlet, urea demand largely decides how hard ammonia plants run. Sources: [Saipem](https://www.saipem.com/sites/default/files/2025-03/Saipem_Snamprogetti%20Urea%20Technology_2025_0.pdf); [IEA](https://www.fertilizer.org/wp-content/uploads/2023/03/2021_IEA_Ammonia-Technology-Roadmap.pdf) ### 2. Same site, shared CO2 *Joint production · Strong · Ammonia plant feeds urea plant* Gas reforming for ammonia produces a pure CO2 stream, which an adjoining urea plant uses as its second raw material. - **about 130 Mt** CO2 used for urea production, 2020 - **about 10%** of world ammonia production exported Only about a tenth of world ammonia is exported, so most of it is converted near where it is made, and urea, a stable solid, carries the nitrogen to world markets instead. Sources: [IEA](https://www.fertilizer.org/wp-content/uploads/2023/03/2021_IEA_Ammonia-Technology-Roadmap.pdf) ### 3. Price link: main product *Cost and price · Strong · Both ways, urea leads* As most ammonia is turned into urea, urea prices drive ammonia margins, and both share gas as their main cost. - **0.27** monthly change correlation, Middle East urea with a US fertiliser price proxy - **0.82** 12-month change correlation, same series - **0.61** fitted elasticity Over a year the two move closely; month to month they can split, because urea also responds to large import tenders and export rules while ammonia also serves industrial and phosphate buyers. Sources: [Material Insights (World Bank, FRED, IMF data)](https://www.materialinsights.org/chemicals/urea/correlation/) ### 4. India's urea pricing *Policy · High in India · Ammonia cost borne by subsidy* India fixes the farm price of urea and pays producers the gap to their cost, so the ammonia and gas costs inside Indian urea are paid through the subsidy rather than by farmers. - **Rs 242** farm price of a 45 kg bag of urea, against a cost of around Rs 2,200 - **30.6 Mt** India's urea output, 2024-25, against 38.8 Mt consumed India made about 8% of world ammonia in 2019. Domestic urea output of 30.6 Mt in 2024-25 fell short of the record 38.8 Mt consumed, and imported urea fills the gap. Sources: [IEA](https://www.fertilizer.org/wp-content/uploads/2023/03/2021_IEA_Ammonia-Technology-Roadmap.pdf); [Rural Voice](https://eng.ruralvoice.in/urea-shortage-likely-as-consumption-set-to-cross-40-million-tonnes-this-year); [Lokmat Times (ANI)](https://www.lokmattimes.com/national/ccea-approves-schemes-for-farmers-rs-368676-crore-committed-for-urea-subsidy-for-three-years) ## For investors ### Key learnings 1. Ammonia producers' margins follow urea, which takes about 55% of ammonia demand, with a 12-month correlation of 0.82. 2. Only about 10% of ammonia is traded, so merchant ammonia prices can move on single plant outages even when urea is calm. 3. Each tonne of urea needs about 0.57 t of ammonia and 0.73 t of CO2, so a urea plant needs both an ammonia supply and a CO2 stream, which is why it is usually built beside an ammonia plant. ### What to track - **Urea price, Middle East granular**: Sets the margin for integrated ammonia and urea producers (Monthly · World Bank Pink Sheet) - **Ammonia price, Tampa contract**: A rise relative to urea favours selling ammonia instead of upgrading it (Monthly · trade press) - **Gas price, TTF and JKM**: Sets the cost floor for both products (Daily · ICE; monthly · World Bank) ## For policymakers ### Key learnings 1. Urea takes about 55% of world ammonia demand, so India's urea self-sufficiency targets largely set how much ammonia capacity it needs. 2. Because the farm price is fixed, rising ammonia and gas costs fall on the subsidy, which was Rs 3.69 lakh crore for 2022-23 to 2024-25. 3. Urea plants use CO2 from their own ammonia units, so switching to low-carbon ammonia would need another CO2 source for urea. ### What to track - **Domestic urea production against consumption**: A widening gap means more imports and price exposure (Monthly · Department of Fertilizers) - **Urea subsidy outgo**: Rising outgo shows ammonia and gas costs reaching the budget (Monthly · Controller General of Accounts) - **Green ammonia tenders and capacity**: Signals how fast low-carbon ammonia may enter fertiliser supply (As announced · Ministry of New and Renewable Energy, SECI) ## India India made about 8% of world ammonia in 2019, yet produced 30.6 Mt of urea against 38.8 Mt consumed in 2024-25. The fixed Rs 242 bag price means ammonia and gas costs are carried by the subsidy. ## Sources 1. [Price correlation, Material Insights](https://www.materialinsights.org/chemicals/urea/correlation/), Material Insights (World Bank, FRED, IMF data) 2. [Snamprogetti urea technology](https://www.saipem.com/sites/default/files/2025-03/Saipem_Snamprogetti%20Urea%20Technology_2025_0.pdf), Saipem (2025) 3. [Ammonia Technology Roadmap](https://www.fertilizer.org/wp-content/uploads/2023/03/2021_IEA_Ammonia-Technology-Roadmap.pdf), IEA (2021) 4. [Urea shortage likely as consumption set to cross 40 million tonnes this year](https://eng.ruralvoice.in/urea-shortage-likely-as-consumption-set-to-cross-40-million-tonnes-this-year), Rural Voice (2025) 5. [CCEA approves schemes for farmers; Rs 3,68,676 crore committed for urea subsidy for three years](https://www.lokmattimes.com/national/ccea-approves-schemes-for-farmers-rs-368676-crore-committed-for-urea-subsidy-for-three-years), Lokmat Times (ANI) (2023)